Phillips Edison & Company Upgraded by Moody’s to ‘Baa2’ with Stable Outlook

Rhea-AI Summary

Phillips Edison & Company (Nasdaq: PECO) has received a credit rating upgrade from Moody's Ratings. The company's issuer credit rating has been raised to 'Baa2' from 'Baa3', with a stable outlook. Moody's cited PECO's high-quality portfolio of grocery-anchored shopping centers, resilient operating cash flows, and moderate leverage metrics as key factors in the upgrade.

The rating agency highlighted PECO's consistently high portfolio lease rate, averaging 97.5% in the last four quarters, and solid leasing spreads of 28% during the same period. Moody's expects PECO to maintain strong operating performance despite the slowing macroeconomic environment, due to its portfolio mix.

Positive

• Credit rating upgraded to 'Baa2' from 'Baa3' by Moody's
• High portfolio lease rate averaging 97.5% in the last four quarters
• Solid leasing spreads averaging 28% in the last four quarters
• Expectation of continued strong operating performance despite slowing macroeconomic environment

Negative

• None.

Insights

Financial Analyst

Moody's upgrade of PECO's credit rating to 'Baa2' from 'Baa3' is a significant positive development for the company. This upgrade reflects PECO's strong financial position and resilient business model. The stable outlook suggests confidence in PECO's ability to maintain its performance even in a challenging economic environment. Key factors supporting this upgrade include:

• High-quality portfolio of grocery-anchored centers
• Consistently high portfolio lease rate (97.5%)
• Impressive leasing spreads (28%)
• Moderate leverage and sound fixed charge coverage

This upgrade could potentially lead to lower borrowing costs for PECO, enhancing its financial flexibility and profitability. Investors should view this as a strong indicator of PECO's financial health and management effectiveness.

Real Estate Market Analyst

PECO's success in maintaining high occupancy rates and strong leasing spreads amidst a challenging retail environment is noteworthy. The 97.5% average lease rate over the past four quarters demonstrates the resilience of grocery-anchored centers. This performance is particularly impressive given the broader retail sector's struggles with e-commerce competition and changing consumer habits. The 28% average leasing spread indicates PECO's ability to command premium rents, likely due to the high foot traffic generated by grocery anchors. These metrics suggest PECO's portfolio is well-positioned to weather economic downturns, offering a degree of stability that's attractive to both tenants and investors in uncertain times.

Economic Analyst

Despite Moody's acknowledgment of a slowing macroeconomic environment, their stable outlook for PECO is telling. It suggests that grocery-anchored retail centers may serve as a defensive play in economic downturns. Consumer staples, particularly groceries, tend to be less affected by economic cycles compared to discretionary retail. However, investors should remain cautious. While PECO's portfolio appears resilient, broader economic pressures could still impact consumer spending and, consequently, PECO's tenants. The company's ability to maintain its strong performance metrics in the face of these headwinds will be crucial. Keep an eye on future earnings reports for any signs of weakness in tenant sales or occupancy rates as leading indicators of potential challenges.

CINCINNATI, Sept. 09, 2024 (GLOBE NEWSWIRE) -- Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO” or the “Company”), one of the nation’s largest owners and operators of high-quality, grocery-anchored neighborhood shopping centers, today announced that Moody's Ratings ("Moody's") upgraded its issuer credit rating for PECO and the Company’s operating partnership, Phillips Edison Grocery Center Operating Partnership I L.P., to ‘Baa2’ from ‘Baa3’, with a stable outlook.

In its public announcement, Moody’s noted: “PECO's Baa2 ratings reflect its high-quality portfolio of open-air neighborhood and community shopping centers, the resilient operating cash flows generated by its grocery-anchored centers, moderate leverage metrics, sound fixed charge coverage and good liquidity.”

Moody’s added: “PECO's portfolio lease rate has been consistently high, averaging 97.5% in the last four quarters, and leasing spreads averaged a solid 28% in the same period. We expect that PECO will continue to report good operating performance over the next few quarters despite the slowing macroeconomic environment because of its portfolio mix. The stable outlook reflects our expectation that PECO's operating performance and financial metrics including net debt to EBITDA and fixed charge coverage will remain strong despite the slowing macroeconomic environment.”

Jeff Edison, Chairman and Chief Executive Officer of PECO stated: “The PECO team is pleased with the recent upgrades from both Moody’s and S&P, which speak to the continued strength of our operating performance. The PECO team is well positioned to continue to deliver strong earnings growth, market-leading operating metrics and long-term value creation.”

Connect with PECO
For additional information, please visit https://www.phillipsedison.com/

Follow PECO on:
Twitter at https://twitter.com/PhillipsEdison
Facebook at https://www.facebook.com/phillipsedison.co
Instagram at https://www.instagram.com/phillips.edison/; and
Find PECO on LinkedIn at https://www.linkedin.com/company/phillipsedison&company

About Phillips Edison & Company
Phillips Edison & Company, Inc. (“PECO”) is one of the nation’s largest owners and operators of grocery-anchored neighborhood shopping centers. Founded in 1991, PECO has generated strong results through its vertically-integrated operating platform and national footprint of well-occupied shopping centers. PECO’s centers feature a mix of national and regional retailers providing necessity-based goods and services in fundamentally strong markets throughout the United States. PECO’s top grocery anchors include Kroger, Publix, Albertsons and Ahold Delhaize. As of June 30, 2024, PECO managed 306 shopping centers, including 286 wholly-owned centers comprising 32.6 million square feet across 31 states and shopping centers owned in two institutional joint ventures. PECO is focused on creating great omni-channel, grocery-anchored shopping experiences and improving communities, one neighborhood shopping center at a time.

PECO uses, and intends to continue to use, its Investors website, which can be found at https://investors.phillipsedison.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.

Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can generally be identified by the Company’s use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “seek,” “objective,” “goal,” “strategy,” “plan,” “focus,” “priority,” “should,” “could,” “potential,” “possible,” “look forward,” “optimistic,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including the risk factors and other risks and uncertainties described in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on February 12, 2024, as updated from time to time in the Company’s periodic and/or current reports filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Investors
Kimberly Green, Head of Investor Relations
(513) 692-3399, kgreen@phillipsedison.com

FAQ

What is Phillips Edison & Company's new credit rating from Moody's as of September 2024?

As of September 2024, Moody's Ratings has upgraded Phillips Edison & Company's (PECO) credit rating to 'Baa2' from 'Baa3', with a stable outlook.

What factors contributed to PECO's credit rating upgrade by Moody's in 2024?

Moody's cited PECO's high-quality portfolio of grocery-anchored shopping centers, resilient operating cash flows, moderate leverage metrics, sound fixed charge coverage, and good liquidity as factors contributing to the credit rating upgrade.

What was PECO's average portfolio lease rate in the last four quarters before September 2024?

PECO's portfolio lease rate averaged 97.5% in the last four quarters before September 2024, as reported by Moody's.

How does Moody's expect PECO (Nasdaq: PECO) to perform in the near future despite the slowing macroeconomic environment?

Moody's expects PECO to continue reporting good operating performance over the next few quarters despite the slowing macroeconomic environment, due to its portfolio mix.